Ms. Sulekha is having income of ₹ 30.00 for consuming two goods Samosa and Jalebi whose prices are ₹ 10.00 and ₹ 2.00 per piece. What will be Sulekha's total price effect when her utility function is U = XY and the price of Samosa decreased to ₹ 5.00 per piece but the price of Jalebi is remaining the same ?
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Demand theory and elasticity has come up 161 times in 7 exams since 2004.
This question is on Income and substitution effects: the Slutsky equation, part of Demand theory and elasticity in Microeconomics.
Splitting a price change into a substitution effect and an income effect, and why Giffen goods break the law of demand.
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Question from the JNU SSS 2020 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.